Report Says Casinos Could Benefit State : Gambling: Legalization in isolated locales would ‘capture’ money bound for Nevada, Administration study suggests.

An official state report suggested Thursday that California consider legalizing casino gambling in a few of its “isolated” border communities to help staunch the flow of gambling money into Nevada.

State officials were quick to point out that although the idea was being broached by his Administration, Gov. Pete Wilson was in no way endorsing such a plan, and the report acknowledged that the issue of casino gambling is likely to generate widespread objections in California.

Nevertheless, the economic paper by the governor’s Office of Planning and Research set out fairly explicit strategies for various options of limited casino gambling in California. It said casinos might operate in sparsely populated locations or in regions near California’s eastern border where prospective gamblers could be “captured” before going to Nevada.

Or, the report said, the state could explore both high- and low-stakes gambling destinations elsewhere. Palm Springs and Treasure Island in San Francisco Bay, it said, “would be obvious candidates” to attract high rollers.

Low-stakes gambling, it said, could be located in “depressed rural cities” at local option. Casinos in those locations may not earn much revenue for the state, the report said, but the “impact in the targeted towns could be enormous.”

“A mass-market gambling center or group of centers would shift a significant fraction of the market from Nevada to California,” it said.

Although the report made no recommendations--and listed the objections to casino gambling along with the benefits--it noted that Californians will contribute to their own economic decline as long as they continue to pump $3.8 billion a year into Nevada casinos. Money from California, the report said, is in effect helping subsidize Nevada services and enabling it to operate its government without a personal or business income tax.

This “friendly” tax and business environment, the report said, was encouraging California businesses to move to Nevada.

“The money Californians spend in gambling and related tourism in Nevada is in a very real sense paying for the exodus of California jobs,” the report said.

The outflow of jobs and businesses to Nevada, the report said, provides the strongest argument for the establishment of some form of casino gambling in California.

“The main motivation would be to deny our most pressing nearby competitor, Nevada, the free ride it gets from Californians’ gambling dollars,” the report said.

In an interview, planning and research Director Richard P. Sybert emphasized that the 22-page report was purely informational and was not proposing that casino gambling be legalized in California. But after dismissing the possibility of widespread casino gambling ever gaining approval in California, the report says, “however, consideration should be given to some form of recapture of at least some of the revenues and competitive subsidy Californians provide to Nevada.”

A spokesman for Gov. Wilson said the report “is simply a descriptive study of the economics of gambling in California and Nevada and is in no way a policy recommendation from the governor.”

Sybert acknowledged that the idea was fraught with political, social and legal problems, possibly the most serious being the potential risk of it “getting out of control” because of the consequences for Indian gaming. Federal law allows Indians to operate any gambling game that is permitted by state law and the approval of even a limited form of casino gambling could pave the way for its establishment at the state’s 96 reservations.

Sybert said the decision to present what he called a “think piece” on gambling stemmed from his assumption that it would only be a matter of time before California’s economic relationship with Nevada became a topic for political and legislative discussion.

“You see the rise of someplace like Laughlin, (Nev.), and you think, ‘What the hell is going on here?’ ” he said.

Located on the Colorado River about 30 miles north of Needles, Laughlin is a city that gambling built almost overnight. From a population of 96 in 1984, Laughlin grew to a city of 6,200 after casinos were built and began attracting thousands of gamblers from other states.

As California’s economy continues to stumble, Sybert said it is only natural that the state begin to look for ways to stop job losses.

California’s economic problems, he said, also come at a time when gambling in general is becoming more acceptable across the nation as states begin to view it as a potential source of revenue.

Commercial casinos, at least in some form, are legal in eight states; government lotteries are operated in 36; 42 states have parimutuel wagering, and two permit sports wagering. California operates its own lottery and permits parimutuel wagering at horse-racing tracks.

Most recently, Illinois and Iowa have approved legislation that permits casino gambling on Mississippi riverboats.

But Sybert warned that widespread casino gambling probably would never be approved by California voters, who have often rejected local attempts to legalize it.

Sybert’s report said that there have been seven attempts in the last 15 years to legalize casino gaming in California, none successful. The issue has never come before California voters.

Nevertheless, several forms of gambling have grown in California in recent years, including the state lottery approved by voters in 1984. Card parlors have grown by local option as more forms of poker and various Asian games have been legalized. Betting on horse races is legal, as are low-stakes charity bingo games. About two dozen Indian reservations in the state offer gambling as allowed by federal law.

The major distinction between casino gambling and California’s card parlors is the way profit is made. In casinos, wagers are made against the house, with the odds fixed so that in the aggregate the house never loses. In the card parlors, the house collects a fee from players and lets the players gamble against each other.

William Eadington, professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno, called the report somewhat naive and said it overlooked several important points in its discussion of casino gambling in California.

Given the current condition of California’s economy, he said it is highly unlikely, for example, that the state could create a “viable” casino at any location.

“The infrastructure costs of reproducing a Las Vegas or Reno are insurmountable,” he said. “It’s a real pipe dream to think you can make Barstow or Truckee the same as South Lake Tahoe.”